DECISION
1. This was
Mr Beckwith’s appeal against a Notice issued under Finance Act 2008, Sch 36,
para 1 (“the Notice”).
2. The Notice
required him to provide various information and documents, including his
private bank statements, for the period relating to his 2007-08 tax return, which
was under enquiry.
3. Mr
Beckwith also appealed against a fixed penalty notice of £300 and a penalty notice
charging a daily penalty of £15 from 14 September 2010 to 21 October 2010,
which totalled £570.
4. The
provisions of Sch 36 which apply to this appeal are set out as an Appendix to
this Decision.
The
issues in the case
5. The first
issue was whether the private bank statements requested in the Notice formed
part of Mr Beckwith’s statutory records. If they did, then he has no right of
appeal against the Notice (Sch 36, para 29(2)).
6. To the
extent that the information requested was not part of Mr Beckwith’s statutory
records, the second issue was whether that information was “reasonably required
by the officer for the purpose of checking the taxpayer's tax position” as required
by Sch 36, para 1.
7. If the personal
bank accounts constitute “statutory records” and/or the information was
“reasonably required”, then the third issue was whether Mr Beckwith had a reasonable
excuse for not complying with the Notice. If he has such an excuse, liability
to a penalty “does not arise” (Sch 36, para 45).
The
evidence
8. The
Tribunal was provided with the correspondence between the parties. Oral
evidence was given by Mrs Ferreiro Cives of HMRC, the investigating officer who
issued the Notice, and also by Mr Edhouse, who acted as agent for Mr Beckwith
throughout the enquiry and conducted all the correspondence.
9. On the basis
of that evidence, we find the following facts.
The
facts
10. Mr Beckwith is a carpenter
who works as a sole trader and sometimes uses sub-contractors. He is VAT
registered.
11. On 17 September 2009, Mrs
Cives opened an enquiry into Mr Beckwith’s 2007-08 SA return.
12. On 25 January 2010, Mrs Cives
met Mr Beckwith and Mr Edhouse to progress the enquiry. Mrs Cives was told that
the business records are maintained by Mrs Beckwith using excel spreadsheets. No
balance sheet is drawn up.
13.
Mr Beckwith said that he had a number of credit cards which were used
for both business and private expenditure. He also said:
(1)
he had a business bank account with Abbey National;
(2)
all his earnings were paid into Abbey National;
(3)
he had private bank accounts, being a current account with First Direct
and a savings account with Nationwide;
(4)
the First Direct account was used to pay the balances due on his credit
cards and “bills are paid from the First Direct account by cheque.”
14. Copies of the Abbey National
business bank statements were supplied to Mrs Cives. The personal bank
statements were not included in the information provided.
15. During the meeting, Mrs
Cives asked about bad debts. The meeting notes record “there were no bad debts
in 2008 and neither Mr Beckwith nor Mr Edhouse could recall seeing any bad
debts written off in the accounts for the year ended 28 February 2008.”
16. On 1 February 2010 Mrs Cives
wrote to Mr Edhouse, asking a number of questions about the business, and in
particular for the First Direct bank statements. She said “this account has
been used to pay business expenses, therefore, the statements form part of the
business records.”
17. Mrs Cives did not receive a
reply and on 5 May 2010 the Notice was issued to Mr Beckwith under Sch 36, para
(1). It was copied to Mr Edhouse.
18. The Notice asked Mr Beckwith
to produce his First Direct bank statements. It also repeated the other
questions raised in Mrs Cives’ letter of 1 February 2010. These covered
payments made to subcontractors, rental income, invoices which did not match to
moneys banked and the low level of cash withdrawals, especially in the run-up
to Christmas.
19. The Notice warned Mr Beckwith
that if he did not comply, he might be subject to a fixed penalty of £300 and
that a further failure to comply could result in a daily penalty being levied.
It concluded “you cannot appeal against having to give me the information and
documents I have requested that relate to your statutory records. However, you
can appeal against having to give me the information and documents that do not relate
to your statutory records.”
20. This Notice appears to have
crossed with Mr Beckwith’s reply to Mrs Cives’s 1 February letter, which was dated
3 May 2010 and received by HMRC on 5 May. In relation to the First Direct account,
Mr Edhouse said “payments by sole traders from their personal accounts take the
form of Capital Introduced to the business and therefore, the personal bank
documentation remains outside your remit and will not be supplied to HMRC.”
21.
On 13 May 2010, Mrs Cives replied to Mr Edhouse. With respect to the
personal bank account, she said
“any account which is used to
pay out or receive money to and from a business forms part of the business
records...if a ‘private’ bank account is used at all to receive business income
or pay business expenses, it is not purely private. It has a dual purpose and
forms part of the business records.”
22.
In the same letter, he also said that she had been unable to match
payments from Mr Beckwith’s expenditure schedule with the expenses on his Abbey
account, and that:
“this reinforces Mr Beckwith’s statement that he uses
another account to make business payments by cheque or direct debit. This may
or may not be the First Direct account, but whichever account it is, I need to
see the account statements.”
23. Mrs Cives also told Mr
Edhouse that she was satisfied on two of her other points of enquiry, but that
three remained outstanding. She asked for the private bank statements and the
information required to settle these other three issues, to be sent to her by
11 June 2010.
24. On 6 July 2010, Mrs Cives
sent Mr Beckwith a “Penalty warning” letter. It said, in bold “This letter is a
final warning” and that if Mr Beckwith did not provide the outstanding items by
26 July 2010, a fixed penalty of £300 would be levied. It continued “if you
still have not given me the items I have asked for by the time I have assessed
that penalty, you may also have to pay a further daily penalty of up to £60 a
day until you do.”
25. By letter dated 17 July
2010, and stamped as received by HMRC on 29 July 2010, Mr Edhouse replied to
Mrs Cives’s letter of 13 May. He provided explanations for some of the outstanding
issues. In answer to Mrs Cives’ question about the invoices which were not
matched by bankings, he said “one small invoice was paid in cash that was never
banked and three others turned out to be bad debts.”
26. In relation to the First
Direct account, Mr Edhouse said that “private banking documentation will not be
made available to you as it is not a requirement under law to do so.”
27. On 5 August 2010, Mrs Cives
wrote to Mr Edhouse. She accepted his explanation for the unmatched invoices,
but still had questions about subcontractor costs and some of the credit card
expenses. She asked for the “bank statements for the other account(s) used to service
Mr Beckwith’s business activities.” She warned that if these were not provided
within 14 days, she would reconsider the penalty of which Mr Beckwith had been
warned in the letter of 6 July 2010.
28. On 16 August 2010 Mr Edhouse
replied, saying that HMRC can only obtain private bank statements if “there is
a specific discovery of fraud”. With respect to the other two questions, he
said that the credit card amounts were “simply drawings” and irrelevant, and
that he would ask the previous accountant about the subcontractor payments.
29. On 24 August 2010 Mrs Cives
wrote to Mr Edhouse, asking again for the personal bank statements but saying
she would postpone issuing the penalty for a further 14 days. She also asked
again for the answers to the other two questions, being contractor costs and
credit card payments.
30. On 13 September 2010, a penalty
notice for £300 was issued to Mr Beckwith. A copy was sent to Mr Edhouse. The
Tribunal finds as a fact that on this date the following information requests
included in the Notice had not been satisfied:
(1)
Copies of the First Direct bank statements.
(2)
Information on subcontractor costs.
31. The third item which remained
outstanding on this date was the credit card payments. Questions about these
payments were first raised by Mrs Cives in her letter of 13 May 2010 and they were
not included in the Notice
32. On 22 October 2010, a
further penalty notice was issued, charging Mr Beckwith £570, being £15 a day
from 14 September 2010 to 21 October 2010.
33. On 29 October 2010 Mr
Edhouse wrote to Mrs Cives, repeating his view that Sch 36 cannot be used
except in cases of fraud. He supplied some information about the subcontractors
(obtained from the previous accountant), and also about the credit cards. On
the same day he appealed both penalties on Mr Beckwith’s behalf.
34. By letter dated 5 November
2010, Mrs Cives replied. She accepted the explanation provided for the credit
card questions but asked for more details about the subcontractor payments. She
also pointed out that Mr Edhouse had appealed only the penalty notices and not
the Notice itself. She said “perhaps you might like to consider making a late
appeal now.”
35. On 21 December 2010, Mr Edhouse
made a late appeal against the Notice, saying he was under the impression that
“his generic letter of 29 October 2010 had also covered this item.”
36. On the same day he replied
to Mrs Cives, including more information about the subcontractor costs. Under
the heading “bad debts” he said “you will recall that two sales invoices were
never paid and due to the original date of sales invoice issue it is obvious that
at 28 February 2008 these must be considered to be bad debts.” He said that he
had calculated that the profit was overstated as a result of these bad debts by
£3,800.
37.
In the same letter, Mr Edhouse said that while he was of the same
opinion about the status of the personal bank account, he had produced a two
page Schedule showing:
“all amounts received into the First Direct bank that
had any relationship with the business...the only amounts were the drawings as
transferred from the Abbey National business account...[It] also outlines
capital introduced into the business by way of payments made on behalf of the
business...”
38. This Schedule discloses
between 7 and 11 business-related transactions each month, covering rent of
£3,869, rates of £1,624, credit card payments of £923, mobile telephone bills
of £923, materials of £66 and drawings of £25,800. There are somewhat more than
100 transactions in total, of which 14 were described as “drawings.”
39. By letter dated 10 January
2011, Mrs Cives challenged the bad debts, reminding Mr Edhouse that in the
original meeting in January 2010, he and Mr Beckwith had said there were no bad
debts.
40. She asked for Mr Edhouse’s
“assurance that your schedule includes all business related deposits and
withdrawals and there are no other such transactions on that account or such
transactions that are unidentified and should be considered business related.”
41. She also raised a number of
specific questions about amounts on Mr Edhouse’s two page schedule.
42. On 15 March 2011 Mr Edhouse
provided the assurance asked for and said “I regard this schedule as a courtesy
to you and not as a supplement to the personal and private First Direct bank
statements.”
43. Further correspondence
ensued, which further narrowed the issues in dispute. The last letter between
Mrs Cives and Mr Edhouse which has been provided to the Tribunal is dated 7
June 2011. As at that date there was only one remaining issue, which concerned
a retention from a sum due to a supplier and therefore did not involve either the
personal bank account or subcontractor payments.
44. Before the Tribunal, Mrs
Cives said that she is now ready to close her enquiry as “everything has now
been resolved”. She said she had accepted Mr Edhouse’s assurances about the
completeness of the Schedule, resolved her other questions, and did not now
need to see the private bank statements. However, she said the enquiry remained
open pending the resolution of this Appeal.
45. Mrs Weare confirmed to the
Tribunal that the Notice had not been withdrawn or cancelled and that HMRC were
asking the Tribunal to uphold both the Notice and the penalty Notices.
Issue
1: are the personal bank statements statutory records?
The legislation
46. Statutory records are
defined in Sch 36, para 62 as follows:
Statutory records
(1) For the
purposes of this Schedule, information or a document forms part of a person's
statutory records if it is information or a document which the person is
required to keep and preserve under or by virtue of—
(a) the Taxes
Acts, or
(b) any
other enactment relating to a tax...
47. Sch 36, para 63 defines “a
tax” as including income tax and VAT.
48. Information and documents
which a person is required to keep for the purposes of the Value Added Taxes
Act 1994 (“VATA”) are set out at Sch 11, para 6:
Duty to keep
records
(1) Every
taxable person shall keep such records as the Commissioners may by regulations
require...
(2) Regulations
under sub-paragraph (1) above may make different provision for different cases
and may be framed by reference to such records as may be specified in any
notice published by the Commissioners in pursuance of the regulations and not
withdrawn by a further notice.
(3) The
Commissioners may require any records kept in pursuance of this paragraph to be
preserved for such period not exceeding 6 years as they may specify in writing
(and different periods may be specified for different cases)
(4) The duty
under this paragraph to preserve records may be discharged—
(a) by
preserving them in any form and by any means, or
(b) by
preserving the information contained in them in any form and by any means,
subject
to any conditions or exceptions specified in writing by the Commissioners for
Her Majesty's Revenue and Customs.
49. Regulation 31 of the VAT
Regulations 1995 specifies at as follows:
Records
(1) Every
taxable person shall, for the purpose of accounting for VAT, keep the following
records—
(a) his business
and accounting records,
(b) his VAT
account,
(c) copies of
all VAT invoices issued by him,
(d) all
VAT invoices received by him...
50.
VAT Notice 700/21 “Keeping VAT Records” at §1 opens by saying “This
notice gives guidance on the records you must keep if you are registered for
VAT.
51.
At §2.3, it states that HMRC’s “view of business records is wide and
will include...bank statements and paying-in slips”. At §2.4 it says:
“Generally, you must keep all your business records
for VAT purposes for at least six years. Records that you use for other tax
purposes may need to be kept for longer periods. If the six-year rule causes
you serious storage problems or undue expense, or you need advice on records
for other types of tax, then you should consult our advice service. We may be
able to allow you to keep some records for a shorter period.”
52. If a document is part of a
taxpayer’s statutory records, he has no right of appeal against the Notice (FA
2008, Sch 36, para 29(2).
The parties’ submissions on
statutory records
53. In correspondence, HMRC
considered that the use of a private bank account to make business payments
made it part of the business records.
54. At the hearing, Mrs Weare
asked the Tribunal to consider whether or not the First Direct account was part
of Mr Beckwith’s “statutory records.”
55. Mr Edhouse submitted that
First Direct account was not part of the statutory records. He said that the
accounts were drawn up using a spreadsheet prepared by Mrs Beckwith, who kept
the books. These spreadsheets were prepared for the purposes of the quarterly
VAT returns and listed the invoices which had been raised and the expenditure. He
said that although he did not prepare the 2007-08 accounts (Mr Beckwith had a
different accountant at the time), he believed that the spreadsheets were
complete and accurate. He submitted that these spreadsheets were Mr Beckwith’s
statutory records.
56. Mr Edhouse was asked by the
Tribunal whether Mrs Beckwith’s schedules were secondary documents, and whether
in his view HMRC had the right to see the underlying primary documents. Mr
Edhouse did not recognise a distinction between primary and secondary
documents, and said that accountants when preparing accounts would look at spreadsheets
such as Mrs Beckwith’s and would not review invoices or bank statements. He
said that at the year-end “the accountant doesn’t conduct an audit.”
Discussion
on the statutory records issue
57. The definition of statutory
records in Sch 36 means that if a taxpayer is required by any statutory provision
relating to tax to keep a document, then that document is a “statutory record”.
There is no necessary link between the tax which is under enquiry, and the
source of the obligation to keep the records for tax purposes. So, for example,
if a document is required to be kept by VATA, then it is a “statutory record”
for the purposes of Sch 36, even if the Notice relates to documents required
for an enquiry into the individual’s self-assessment return.
58. Mr Beckwith is a
self-employed individual who is VAT registered. We set out earlier in this
Decision the relevant statutory record-keeping requirements under VATA. Mr
Beckwith was required to keep records by VATA, Sch 11 para 6.
59. Reg 31 of the VAT
Regulations specifies that these records include “business and accounting
records.” VATA, Sch 11 para 6(2) also allows this regulation “to be framed by
reference to such records as may be specified in any notice published by the
Commissioners.”
60. Notice 700/21 “Keeping business
records” says that bank statements are among those business records which
“must” be kept. HMRC have also set out “in writing”, as allowed by VATA, Sch 11
para 6(3), that business records must be kept for a minimum of six years.
61. Business bank statements
thus constitute business records and statutory records. Mr Beckwith’s business
bank account was produced without complaint to HMRC; we read this as indicating
that Mr Edhouse accepts that a business bank account is a “business record” and
on the above analysis he was correct to do so.
62. What, then, of the First
Direct account? Over 90
business transactions went through this account during the year under enquiry.
The account
was used to settle business purchases made by credit card, to pay rent and
rates relating to the business, to buy one item of materials and to settle business
phone bills.
63. Mr Beckwith’s Schedule
categorises all these items of expenditure as “capital introduced”, with the
regular deposits of income being described as “drawings.” The total “drawings”
are £25,800; the “capital introduced” is £19,666.
64. This is not an account from
which Mr Beckwith makes occasional injections of funds into his business –
indeed, the net balance in relation to these transactions is negative (£25,800
less £19,666), so there was no net inflow of funds at all.
It is an operational part of the business, used for making regular payments of
business expenses. The fact that this bank account also contains personal
expenditure does not prevent the bank statements from being “business records” and
thus “statutory records” within the meaning of Sch 36.
65. For completeness, we note Mr
Edhouse’s submission that accountants when preparing accounts rely on
spreadsheets and do not review invoices or bank statements. This may well be
the case, but it is not relevant to the classification of bank statements as
statutory records.
Decision
on statutory records
66. Our decision on the first
issue is that Mr Beckwith’s First Direct Account is a “business record” and so
forms part of his statutory records.
67. As a result, Mr Beckwith has
no right of appeal against a Notice under Sch 36, para (1) to the extent that
it asks for the bank statements relating to First Direct account.
Issue
2: was information in the Notice “reasonably required”?
68. Our decision that the First
Direct bank statements were statutory records makes it unnecessary to consider whether
HMRC’s request for them was “reasonably required”. However, in case we are
wrong in that conclusion we have gone on to consider whether the bank
statements would have been “reasonably required” for the purposes of checking
Mr Beckwith’s tax position.
69. In addition, as the Notice
did not only cover the First Direct bank statements but included several other
information requests, we must consider whether this other information was
“reasonably required” for the purposes of checking his tax position.
Submissions of the parties on “reasonably required”
70. Mr Edhouse said that “all
relevant business documentation” was supplied to HMRC at the meeting on 25
January 2010.
71. In relation to the First
Direct statements, he said that Mrs Cives accepted after receiving his Schedule
that she didn’t need these documents and as a result they couldn’t be
“reasonably required.”
72. Mrs Weare said that at the
time the Notices were issued, the information asked for was “reasonably
required”. Mrs Cives had written to ask for this information on 1 February 2010
but no reply was received for over three months. The Notice was issued in May
2010.
Issue 2: whether
the information (other than the First Direct bank statements) was “reasonably
required”?
73. The test which has to be
applied under Sch 36, para (1) is whether the information included in the Notice
was “reasonably required by the officer for the purpose of checking the
taxpayer's tax position”.
74. If the validity of the
Notice depended on hindsight, it would not be possible to know, until some
indeterminate future date, whether the Notice was correctly issued. In our
judgment, the statutory test must be applied at the date the Notice was issued.
75. The Notice was issued on 5
May 2010. As at that date, Mrs Cives had legitimate questions arising from the
meeting on 25 January 2010, to which she had received no answers. It was not
the case (as Mr Edhouse asserts) that “all relevant business documentation” had
been supplied to her at that meeting.
76. We find that the information
requested in the Notice, which covered payments made to subcontractors, rental
income, invoices which did not match to moneys banked and the low level of cash
withdrawals, were all “reasonably required” for the purpose of checking Mr
Beckwith’s tax position.
77. The fact that Mr Edhouse
was, eventually, able to satisfy Mr Cives as to Mr Beckwith’s tax position does
not change the position: as we said above, hindsight is not the criterion for
establishing whether or not the statutory test is met.
Issue 2: whether
the personal bank statements were “reasonably required”
78. Mr Beckwith admitted, at the
meeting in January 2010, that business amounts went through his private account.
Mrs Cives had tried, and failed, to reconcile the paperwork without sight of
the First Direct statements.
79. In our judgment the personal
bank statements (through which around 90 business expenses were paid) were
clearly “reasonably required” for the purposes of checking Mr Beckwith’s tax
position.
80. Again, the fact that Mrs
Cives subsequently accepted, in lieu of the private bank statements, a summary
provided by Mr Edhouse together with his personal assurance that it was
complete and correct, does not change the position. At the time the Notice was
issued the requirement to provide the bank statements was entirely reasonable.
81. For completeness, we say
that Mr Edhouse’s frequently repeated assertion that personal bank statements
can only be required under Sch 36 if there is evidence of fraud, does not
accord with the legislation. There is no statutory requirement that HMRC have
to prove or allege fraud before including personal bank statements in a Sch 36
Notice.
Issue 2: Decision
on “reasonably required”
82. We find that the information
included in the Notice was reasonably required in so far as it covers matters
other than the First Direct statements. Mr Beckwith’s appeal against those
parts of the Notice is dismissed.
83. Were the First Direct statements
not “statutory records” we would have found that the Notice was reasonably
required in so far as it included a request for those statements, and we would
have dismissed the appeal.
Issue
3: Appeal against the penalties
84. No separate oral submissions
were made on the penalties, or the question of reasonable excuse.
85. We have, however, considered
whether the facts do disclose a reasonable excuse for the non-compliance with
the Notice, and we have also considered Mr Edhouse’s written grounds of appeal
to the Tribunal which are set out earlier in this Decision.
86. As at the date the penalties
were issued, Mr Beckwith had not complied with two of the requests in the
Notice - the subcontractor costs and the First Direct bank statements.
87. In relation to the
subcontractor costs, we note that Mr Edhouse was only able to answer Mrs Cives’
questions by obtaining information from the previous accountant and we
considered whether this provided him with a reasonable excuse. In his letter of
16 August 2010 Mr Edhouse told HMRC that he made contact with the previous
accountant, and the information (which gave rise to further questions) was
supplied to HMRC on 29 October.
88. However, Mrs Cives had repeatedly
requested this information from Mr Edhouse and he could have asked the previous
accountant at an earlier stage. He was asked on 1 February 2010; on 5 May 2010,
by way of the text of the Notice itself; on 13 May 2010 Mrs Cives extended the
deadline to comply with her request; on 6 July she sent a “final warning”;
after a small flurry of correspondence over the summer, she issued another
warning on 24 August and finally imposed the penalties in September and
October. In our view, the fact that Mr Edhouse had to obtain information from
the previous accountant does not provide a reasonable excuse for the penalty.
89. In relation to the First
Direct statements, Mr Edhouse gave two reasons for non-compliance. The first
was that the Notice was ultra vires or beyond the powers of HMRC,
because there was no fraud. This, as we have already said, is not the statutory
test, and misunderstanding the law is not a reasonable excuse.
90. His second reason is that
any money paid out of the personal account is “capital introduced”. This was
his stated ground of appeal to the Tribunal. For the reasons we have already
discussed, we do not find that categorising expenditure as “capital introduced”
in any way prevents the bank statements being “business records” ; we do not
find that his belief to the contrary provides a reasonable excuse.
Decision
91. Because we have found that
the First Direct account formed part of Mr Beckwith’s statutory records, there
is no right of appeal against the part of the Notice relating to that bank
account. We therefore strike out Mr Beckwith’s appeal against that part of the
Notice.
92. This means that the Notice
can be enforced by HMRC in relation to the First Direct bank statements
(subject to Mr Beckwith’s right to appeal this part of our Decision, see
below).
93. We find that the other information
requested in the Notice was “reasonably required by the officer for the purpose
of checking the taxpayer's tax position”.
94. Under Sch 36, para 32 the
Tribunal is empowered to confirm, vary or set aside any requirement in the
Notice. If we confirm or vary a requirement, the recipient of the Notice must
comply with that requirement, and the Tribunal can specify a period within
which compliance must take place. If the Tribunal does not specify a period,
then the person must comply “within such period as is reasonably specified in
writing by an officer of Revenue and Customs following the tribunal's
decision.”
95. We confirm all the
requirements
in the Notice, but (noting the evidence of Mrs Cives, the investigating officer
in the case) we do not set a timetable for compliance, but leave this to HMRC.
96. We dismiss Mr Beckwith’s
appeal against the penalties as we find there was no reasonable excuse.
97. The Tribunal has considered
its powers under Sch 36, para 48 and decided to confirm the penalties in the
sum of £300 for the fixed penalty and £570 for the variable penalty.
Appeal
rights
98. There is no right of appeal
against our Decision to uphold the parts of the Notice dealing with information
other than the First Direct bank statements. Under Sch 36, para 32(5) our
Decision on this final.
99. We found that Mr Beckwith
had no right of appeal to this Tribunal in relation to the First Direct bank
statements, because they were statutory records. The normal appeal rights apply
to our Decision to strike out this part of his appeal (see LS v London Borough of Lambeth (HB) [2010] UKUT 461 (AAC)).
100.Normal appeal
rights also apply to our Decision to confirm the penalties (Sch 36, para
32(6)).
101.Any party
dissatisfied with the Tribunal’s Decision to strike out the appeal, or its Decision
to confirm the penalties, or both, has a right to apply for permission to
appeal, pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009.
102.The
application must be received by this Tribunal not later than 56 days after this
decision is sent to that party. The parties are referred to “Guidance to
accompany a Decision from the First-tier Tribunal (Tax Chamber)” which
accompanies and forms part of this Decision Notice.
103.This document
contains full findings of fact and reasons for the Decisions.
Anne Redston
TRIBUNAL PRESIDING MEMBER
RELEASE DATE: 8March 2012
LEGISLATION
Finance Act 2008, Schedule 36
1 Power to obtain information and documents from taxpayer
(1) An officer of Revenue and Customs may by notice in
writing require a person ("the taxpayer")—
(a) to provide information, or
(b) to produce a document,
if the information or document is reasonably required by the
officer for the purpose of checking the taxpayer's tax position.
(2) In this Schedule, "taxpayer notice"
means a notice under this paragraph....
....
6 Notices
(1) In this Schedule,
"information notice" means a notice under paragraph 1, 2 or 5.
(2) An information notice
may specify or describe the information or documents to be provided or produced
7. Complying with notices
(1) Where a person is
required by an information notice to provide information or produce a document,
the person must do so—
(a) within such period, and
(b) at such time, by such
means and in such form (if any),
as is reasonably specified or
described in the notice.
....
29 Right to appeal against
taxpayer notice
(1) Where a taxpayer is
given a taxpayer notice, the taxpayer may appeal against the notice or any
requirement in the notice.
(2) Sub-paragraph (1) does
not apply to a requirement in a taxpayer notice to provide any information, or
produce any document, that forms part of the taxpayer's statutory records.
32 Procedure
(1) Notice of an appeal
under this Part of this Schedule must be given—
(a) in writing,
(b) before the end of the
period of 30 days beginning with the date on which the information notice is
given, and
(c) to the officer of
Revenue and Customs by whom the information notice was given.
(2) Notice of an appeal
under this Part of this Schedule must state the grounds of appeal.
(3) On an appeal that is
notified to the tribunal, the tribunal may—
(a) confirm the information
notice or a requirement in the information notice,
(b) vary the information
notice or such a requirement, or
(c) set aside the
information notice or such a requirement.
(4) Where the tribunal
confirms or varies the information notice or a requirement, the person to whom
the information notice was given must comply with the notice or requirement—
(a) within such period as
is specified by the tribunal, or
(b) if the tribunal does
not specify a period, within such period as is reasonably specified in writing
by an officer of Revenue and Customs following the tribunal's decision.
(5) Notwithstanding the
provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act
2007 a decision of the tribunal on an appeal under this Part of this Schedule
is final.
(6) Subject to this
paragraph, the provisions of Part 5 of TMA 1970 relating to appeals have effect
in relation to appeals under this Part of this Schedule as they have effect in
relation to an appeal against an assessment to income tax.
39 Penalties for failure to
comply or obstruction
(1) This paragraph applies
to a person who—
(a) fails to comply with an
information notice, or
(b) ....
(2) The person is liable to
a penalty of £300.
40 Daily default penalties
for failure to comply or obstruction
(1) This paragraph applies
if the failure...mentioned in paragraph 39(1) continues after the date on which
a penalty is imposed under that paragraph in respect of the failure...
(2) The person is liable to
a further penalty or penalties not exceeding £60 for each subsequent day on
which the failure...continues.
44 Failure to comply with time limit
A failure by a person to do anything required to be done
within a limited period of time does not give rise to liability to a penalty
under paragraph 39 or 40 if the person did it within such further time, if any,
as an officer of Revenue and Customs may have allowed.
45 Reasonable excuse
(1) Liability to a penalty under paragraph 39 or 40
does not arise if the person satisfies HMRC or (on an appeal notified to the
tribunal) the tribunal that there is a reasonable excuse for the failure or the
obstruction of an officer of Revenue and Customs.
(2) For the purposes of this paragraph—
(a) an insufficiency of funds is not a reasonable
excuse unless attributable to events outside the person's control,
(b) where the person relies on any other person to do
anything, that is not a reasonable excuse unless the first person took
reasonable care to avoid the failure or obstruction, and
(c) where the person had a reasonable excuse for the
failure or obstruction but the excuse has ceased, the person is to be treated
as having continued to have the excuse if the failure is remedied, or the
obstruction stops, without unreasonable delay after the excuse ceased.
...
47 Right to appeal against penalty
A person may appeal against any of the following decisions
of an officer of Revenue and Customs—
(a) a decision that a penalty is payable by that
person under paragraph 39, 40 or 40A, or
(b) a decision as to the amount of such a penalty.
48 Procedure on appeal against penalty
(1) Notice of an appeal under paragraph 47 must be
given—
(a) in writing,
(b) before the end of the period of 30 days beginning
with the date on which the notification under paragraph 46 was issued, and
(c) to HMRC.
(2) Notice of an appeal under paragraph 47 must state
the grounds of appeal.
(3) On an appeal under paragraph 47(a), that is
notified to the tribunal, the tribunal may confirm or cancel the decision.
(4) On an appeal under paragraph 47(b), that is
notified to the tribunal, the tribunal may—
(a) confirm the decision, or
(b) substitute for the decision another decision that
the officer of Revenue and Customs had power to make.
(5) Subject to this paragraph and paragraph 49, the
provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to
appeals under this Part of this Schedule as they have effect in relation to an
appeal against an assessment to income tax.
49 Enforcement of penalty
(1) A penalty under paragraph 39, 40 or 40A must be
paid—
(a) before the end of the period of 30 days beginning
with the date on which the notification under paragraph 46 was issued, or
(b) if a notice of an appeal against the penalty is
given, before the end of the period of 30 days beginning with the date on which
the appeal is determined or withdrawn.
(2) A penalty under paragraph 39, 40 or 40A may be
enforced as if it were income tax charged in an assessment and due and payable.
58 General interpretation
In this Schedule—
"document" includes a part of a document (except
where the context otherwise requires),
"enactment" includes subordinate legislation
(within the meaning of the Interpretation Act 1978 (c 30))...
"the Taxes Acts" means—
(a) TMA 1970,
(b) the Tax Acts, and
(c) TCGA 1992 and all other enactments relating to
capital gains tax...
62 Statutory records
(1) For the purposes of this Schedule, information or
a document forms part of a person's statutory records if it is information or a
document which the person is required to keep and preserve under or by virtue
of—
(a) the Taxes Acts, or
(b) any other enactment relating to a tax,
subject to the following provisions of this paragraph.
(2) To the extent that any information or document
that is required to be kept and preserved under or by virtue of the Taxes Acts—
(a) does not relate to the carrying on of a business,
and
(b) is not also required to be kept or preserved under
or by virtue of [any other enactment relating to a tax,
it only forms part of a person's statutory records to the
extent that the chargeable period or periods to which it relates has or have
ended.
(3) Information and documents cease to form part of a
person's statutory records when the period for which they are required to be
preserved by the enactments mentioned in sub-paragraph (1) has expired.
63 Tax
(1) In this Schedule, except where the context
otherwise requires, "tax" means all or any of the following—
(a) income tax,
(b) capital gains tax,
(c) corporation tax,
(d) VAT....
and references to "a tax" are to be interpreted
accordingly.
